QUALIFIED OPPORTUNITY FUNDS (QOF)
If you’re selling a business, real estate, or a highly appreciated stock, re-investing in a qualified opportunity fund could help you defer, reduce, or eliminate capital gains taxes — while making an impact in the process.
In 2017, the Tax Cuts and Jobs Act established a new tax incentive to encourage investments in over 8,000 designated opportunity zones that haven’t seen significant capital investment in decades.
When you invest in properties through a qualified opportunity fund, you’re not only eligible for significant tax benefits. You’re also revitalizing up-and-coming communities by creating more jobs, driving business, and expanding housing.
You can defer both short and long term capital gains until December 31, 2026 when you invest in a QOF within 180 days of the sale of your asset.
You’ll pay no taxes on capital gains acquired after your money has been invested in the QOF, as long as you keep the investment for at least 10 years.
You can keep your funds invested until 2047, giving you decades with the potential to increase your funds without any additional capital gains tax burden.
Two investors each sell an asset that generates a $1,000,000 long-term gain. Investor A pays capital gains taxes and invests the remaining capital in a product that generates a 10% compounded annual return over ten years and then liquidates the investment. Investor B invests the gain in a Qualified Opportunity Fund, which generates the same return over the same time period. Both investors are residents of a state that conforms with the QOZ Program and are subject to the top marginal U.S. federal income tax rate of 20% on long-term capital gains for individuals, the net investment income tax of 3.8% and a state tax of 6.2%, for a total tax liability of 30%.
Capital Gain Proceeds From Sale
Long-term Capital Gains Tax Rate (Federal + ACA)
Compounded Hypothetical Return
Capital Gain Proceeds From Sale
2021 Taxes Owed On Gain
Capital For Reinvestment (after tax)
Tax on Appreciation
Long Term Capital Gains Taxes (Paid in 2027)
Add back initial investment
Final Value (After 10 Years, Net of Taxes Paid)
Initial Capital Gain (2021)
Taxes Paid (2021)
Capital for Reinvestment
Sale Proceeds (2032)
Taxes Paid (2027)
Taxes Paid (2032)
Ending Value Net of Taxes
Difference with QOF
Qualified Opportunity Funds are speculative in nature and heavily reliant on the assumptions used by investment sponsors which may prove to be inaccurate.
No public market currently exists and one is unlikely to develop. Selling an interest in a QOF may proved to be difficult or impossible.
Investments in real estate are subject to various economic risks including among other things recession, inflation, supply and changing market demographics.
The amount and timing of QOF investment distributions are not guaranteed. There is no guarantee that investor will receive distributions or a return of capital.
Tax rules and guidelines for QOZ investing have not been finalized and subsequent changes to QOZ rules and guidelines may have material adverse consequences to QOF Funds and their investors.
The regulatory framework governing QOZ investing is fluid and changes are ongoing. Subsequent changes to QOZ and QOF regulations may have material adverse consequences to QOF Funds and their investors.
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This website is for informational purposes only. This website does not provide investment advice or recommendations, nor is it an offer or solicitation of any kind to buy or sell any investment products. Securities offered through Stax Capital, Member FINRA & SIPC. Stax Capital is located at 7960 Entrada Lazanja, San Diego, CA 92127. Contact us toll free at 844-427-1031. Private Placements and Direct Participation Programs are speculative investments and involve a high degree of risk. An investor could lose all or a substantial portion of his/her investment. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment in Private Placements and Direct Participation Programs. Private Placements and Direct Participation Program offering materials are not reviewed or approved by federal or state regulators. Investors should not place undue reliance on hypothetical or pro forma performance summaries. Investors must conduct their own due diligence and should rely on the advice of their own financial, tax and legal advisors prior to making any investment decisions.
The contents of this website are neither an offer to sell nor a solicitation of an offer to buy any security which can only be made by prospectus. Investing in real estate and 1031 exchange replacement properties may not be suitable for all investors and may involve significant risks. These risks include, but are not limited to, lack of liquidity, limited transferability, conflicts of interest and real estate fluctuations based upon a number of factors, which may include changes in interest rates, laws, operating expenses, insurance costs and tenant turnover. Investors should also understand all fees associated with a particular investment and how those fees could affect the overall performance of the investment. Neither Stax Capital nor any of its representatives provide tax or legal advice, as such advice can only be provided by a qualified tax or legal professional, who all investors should consult prior to making any investment decision. Pursuant to SEC rule 501 of Regulation D, prior to engaging in substantive discussions regarding DST specific investments, investors must first be qualified as an accredited investor, by way of meeting certain income or net worth requirements.
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There are substantial risks in the DST Investment program. This type of investment is speculative, is illiquid, and carries a high degree of risk – including the potential loss of the entire investment. See the “risk factors” in the Private Placement Memorandum for a complete discussion of the risks relevant to DST offerings. Investors have no control over management of the Trust or the property. There is no guarantee that investors will receive any return. Distributions may be derived from sources other than earnings. The property will be subject to a Master Lease with an Affiliate of the Sponsor. The property will be subject to the risks generally associated with the acquisition, ownership and operation of real estate including, without limitation, environmental concerns, competition, occupancy, easements and restrictions and other real estate related risks. The properties may be leveraged. The Manager, the Master Tenant and their Affiliates will receive substantial compensation in connection with the Offering and in connection with the ongoing management and operation of the property. The Manager, the Trust, the Master Tenant and their Affiliates will be subject to certain conflicts of interest. An investment in the Interests involves certain tax risks.